Contents
eToro, an advisable online brokerage for those in Kenya who want to purchase NEO
Some of its advantages are:
- There are tons of investment possibilities
- Leverage is allowed
- It is uncomplicated and accessible
- Allows to imitate investment moves
- You can go short
Homepage: www.etoro.com/neo
If you are considering purchasing NEO from Kenya, eToro may be the best way to do it.
eToro is well-known for making “social trading” a trend. Social trading is a revolutionary form of investing in which investors can replicate the movements of other traders who have been making earnings for years.
eToro has solutions for you, especially if you don't have much experience in trading. You can rest assured that you are doing a smart investment move when replicating those from subjects with a long profit record. And for those skilled investors willing to share their techniques, eToro pays for it.
It is also worth mentioning how easy is to manage this platform, excellent for beginners who are starting with NEO.
ETFs
ETFs or Exchange-Traded Funds are a type of passively managed fund, similar to index funds. They can be described as a combination of stocks and mutual funds. They can be traded like regular stocks, but include a wide diversity of assets and their commissions are much lower than those of an actively managed fund.
Stocks
The most well-known financial instruments are stocks: these are fractions in which an enterprise can be shared, and thanks to capitalism you may obtain a profit through third-party companies just by investing money in them. But, obviously, you have to know how to invest.
Basically, there are two types of stocks: the ones that divide their earnings regularly among the shareholders, and those that don't payout. The former ones are great, obviously, but investing in the latter can be a good idea too since the profit you can make by selling the shares can be even larger.
If you invest in shares that payout, you will receive the funds into your eToro account, and you can withdraw them or invest back. However, you can benefit a lot from compound interest, so our suggestion is that you reinvest in the company.
Remember that when investing in shares on eToro you can use leverage to “dope” your trades, but in that case, you will not receive returns as the trade is a CFD. That is why for long-term investments, it is better not to use leverage: you can end up not gaining at all, because you will not receive dividends and also you will have to pay fees while your position is open.
About ETFs
Exchange-Traded Funds or ETFs are similar to index funds. We can say that ETFs are somewhere between stocks and funds: they are publicly traded and therefore can be exchanged at any time at market price. However, their advantage is that they offer more alternatives compared to stocks, and the rates are much lower than those of an actively managed fund.
Index Funds
Are the best alternative for those planning to invest for the long term, mostly for beginners. If you don't need an amount of money for the next five or ten years, index funds are a secure option.
You may think differently, but beating the benchmark is far from being a piece of cake and very few fund managers achieve that, apart from some famous cases.
If a fund manager brags about having beaten the benchmark, they probably did it for a short time or on particular occasions, or sometimes the charges are so high that indexing would be a better decision anyway.
Index funds offer these two great benefits: most of the time, they beat active managers in the long term, and the fees are minimal.
Raw materials
The main benefit of trading with commodities is that prices are more stable than those of other financial products. Actually, their intrinsic stability is what makes most investors trade with raw materials when facing market volatility or inflation. Nonetheless, the prices of commodities are defined by their demand. Therefore, if a given economic situation causes higher demand, the prices will also be higher.
Consider that raw materials don't pay dividends. Thus, by investing in them you will only have a further profit by selling them back.
There are two basic types of commodities: hard raw materials and soft raw materials. The former are precious metals (such as gold, silver, copper, and platinum), industrial metals (for instance, iron, nickel, or aluminum), and oil; and the latter are agricultural resources, such as wheat, soybeans, vegetables, or even dairy, among many others.
In case you still don't know what “leverage” is, we'll describe it briefly: it is, simply, the ability to use a higher amount than you actually have. For example, you can enter with $ 100, but if you leverage x2, your initial investment will be $ 200.
About leverage, Take Profit and Stop Loss
Assuming that, for instance, you are sure that NEO is going up, and that you have $ 1,000 for “going long”, you must know that you can increase your investment and earn higher profits.
Possibly, you could ask your bank for a loan, wait for it to be accepted and receiving the money, send the money to eToro, confirm that it arrived, and then acquire NEO… Nevertheless, once you've managed doing all that, probably NEO would be already much higher, and it wouldn't be a good idea to invest then.
Leverage is exactly like a credit, but it is only a few clicks away! eToro allows you to invest (and earn) much higher amounts than what you actually have on the platform's wallet. Before trading, you will see the leverage options as in the image:
Within other markets, the ability to leverage is greater. This is because leverage is most used for short-term operations or day trading, and cryptocurrencies tend to be a medium or long-term investment. But let's see how leverage works in the practice:
- If you decide to invest $ 1,000 and you use leverage x2, you will be starting with $ 2,000 ($ 1,000 was “borrowed” from eToro).
- Then, turns out that NEO does increases, as you assumed, and now the cost of your investment is $ 2,400 (20% more), so you decide to sell back.
- The $ 1k of leverage will be deducted, and you will have $ 1,400 left; which means you've earned $ 400, since the other $1,000 was yours from the beginning.
In conclusion, by investing $ 1000 you can make a profit of 40% (in the case you earn $ 400). That is quite good.
But watch out: if all goes as you intended and the price goes up, you will make profits. However, if the price falls, you will also lose more money in the blink of an eye.
Let's imagine that the asset didn't increase by 20%, but it decreased also by 20%, you won't lose $ 20 but double, $ 40. That is why to operate with leverage it is crucial to know about Take Profit and Stop Loss.
Take Profit is used as a form of reducing risks when trading. When you enter, you can set a profit limit and ask that your position is automatically closed when the asset reaches a price.
If you bought NEO at $ 100, you program eToro to close your operation when it reaches $ 120. That way, you make sure you won't be blinded by greed and decide to keep waiting in case it keeps going up, which could be a mistake.
Stop Loss is even more important, particularly if you trade with leverage, because a small loss with leverage can be fatal for your wallet. Take into account that eToro will recommend a limit for Stop Loss, but it is better to set it lower than the platform suggests.
eToro deposit methods
When it comes to depositing funds on eToro, there isn't really much to say, since it is pretty simple. You just have to click “Deposit funds”, put an amount, and choose your payment method. You can use PayPal (available for some countries), bank transfer, credit card, Skrill, or Neteller.
Consider that for security policies, you must be the owner of the credit card or the account.
The minimum you can deposit is $ 200 and there is a limited amount if you are not verified. Therefore, in case you want to trade with larger sums, contact Support beforehand to verify your account.
The platform accepts deposits in any currency, but charges a commission for making the conversion to USD. That is why we recommend, if it is in your hands, depositing in USD from the beginning.
Futures Vs CFD
Here is a brief comparison between CFDs and Futures, in case you want to know more:
- Which are the counterparties? With Futures, the counterparty is another trader. In CDFs, it’s the brokerage, in this case eToro
- When do they expire? Futures have a determined expiration. CFDs don’t have expiry date
- Variety of options for trading Futures include fewer options to trade. With CFDs you can trade in several different markets.
- Minimum deposit Costs for Futures are higher than costs for CFDs.
- Is it possible to leverage? With Futures, it isn’t possible; while with CFDs it is.
About Contracts for Difference
If you already registered on eToro, you probably noticed that the acronym CFD appears repeatedly. We will explain its meaning now, but you should know first that CFDs on eToro are only possible if you are short-selling.
We will also refer to terms such as leverage and “going short”, in case you are interested in day trading cryptocurrency or more advanced practices.
Even if you aren't “in the black”, you can still operate on eToro with CFDs. Let's say that you are sure that the NEO will fall, so perhaps you think that the best thing to do is wait until it does and then go in. But if it really falls, it might mean extra money for you.
The operation known as “going short” will allow you to do that. It functions, more or less, as it follows:
- You ask someone for a loan of, let's say, 100 units of NEO, which total price at that moment is $ 5,000 (obviously, these numbers are made up)
- You sell them at their current price, $ 5,000
- The price is reduced, as you thought, and the unit of NEO goes from $ 50 to $ 30
- You obtain the 100 units again, but at $ 3,000
- You pay back the 100 units
- The difference is yours, so, you will have earned $ 2000
It is far more simple than it may seem. Just keep in mind that by trading in NEO on eToro, with CFDs you can make money when you anticipate the price will fall.
How does eToro work?
As we have mentioned previously, one of the best things about eToro is its extraordinary simplicity: anyone can use it without having to read endless guides.
Everyone who has previously used social networks like Twitter or Facebook, knows enough to use eToro.
We will explain, roughly, the registration steps and the different sections that you will find.
When you register, you will have to enter your personal data.
Additionally, you will see that they ask you some questions about your experience at investing.
But don't feel like you are taking an exam. The objective is to know more about you and be clear about which financial instruments they should recommend according to your knowledge and experience.
Let's review the different functions of the page.
In “Set Price Alerts”, you have, as its name says, the option to put alarms on the price of certain securities. This is very useful when you are after an asset which price is decreasing, but it seems to you that it will decrease even more.
The section “News Feed” allows users to interact and learn from each other by sharing their opinion and experiences.
“Instruments”, “People” and “CopyPortfolios” are within “Discover”. As we mentioned previously, the six types of instruments on eToro are:
- Cryptocurrencies
- ETFs
- Shares
- Raw materials
- Forex trading
- Index funds
In “People” are all the profiles and historical performances of other users, and you can replicate their movements with just one click. This is where the “social trading” concept is best applied.
You will be able to search and find users according to your interests. You can search by risk level, trading market, or average profits, among other filters. When you choose an investor and indicate the amount you want to invest, eToro will automatically replicate their movements, in proportion. If you invest $ 1000 and the trader puts 20% of their funds in an asset, the platform will also invest 20% of your money in the same company or instrument, in this case, $ 200.
You will also see the CopyPortfolios divided into three main kinds: “Top Trader”, “Market” and “Partner”.
Remember that in some cases, you might prefer copying to CopyPortfolios than to particular users, because the former offer more diversity. Besides, the different portfolios are easily identifiable: one about gaming, another about large drone companies, another about pharmacy … Do you suspect that a certain industry is going to have success anytime soon? Then you will surely find a CopyPortfolio about it.
Trading strategies
When trading cryptocurrencies, there are different possible methods or strategies, like buying and holding or day trading, for naming just a couple.
My recommendation for those who are beginning to invest is going for a middle point: when you open your position, set a dynamic stop loss 15-20% under the highest price, and let the magic happen.
This means that if, for instance, you buy a cryptocurrency at $ 10, it rises to $ 20, and after that it decreases to $ 12, your stop loss will take you out of the trade at $ 16-17 and you will obtain a pretty good profit.
I know it might sound more appealing to sell when the cost is at its maximum, but unless you're psychic, that is not possible. The mentioned method is much more down-to-earth and it can give great results.
At some point, you can take your first steps with advanced investment techniques, like using leverage or going short.
Practice account
In case you do not have much experience investing, you can start by practicing with a “demo” option. Setting a virtual account and operating with fictional money is very easy.
This tool is perfect for those who are new to this world and want to give it a few tries before trading with real funds. When you create your account, you will start with $ 100,000 of virtual funds to do all the operations that you can think of: not just with NEO, you can also create a diverse portfolio.
The first attempt is not usually that good. But you can ask support to deposit back the virtual $ 100k to your account.
But keep in mind that you need to be prudent for trading, and using a demo account can have the opposite effect. It is completely different to risk your real savings than to do operations with a false balance that you don't mind losing.
As you may suppose, if you want to invest in the medium or long-term, with earnings almost guaranteed only by duplicating an index, it doesn't make sense that you waste years investing in virtual mode. On the contrary, the virtual mode can be helpful to practice with short and medium-term investments.